UK Keeps Rates Unchanged At 0.5%

The great tightening wave in Europe is coming any minute now.... Just not yet. Below is Goldman's take on today's unsurprising move by the BOE to keep rates unchanged (although judging by the GBP some actually were surprised).

We expect the first 25bp hike in May. Two things, in particular, wil be key in the run-up to the next Inflation Report, (i) whether a combination of revisions to Q4 GDP and the first release of Q1 GDP lifts the path of official output closer to that implied by business surveys, and (ii) the development of wage settelements in the private sector, the median of which rose sharply to almost 3% in January on IDS data.

"WB: JPM is in worse shape then we ever dared to hope 20-Nov-10 07:06 amBlythe,

This is what I am now hearing from traders on the floor. These traders are not even sure if Blythe knows the full extent of JPM's silver exposure.

When I first started to realize that JPM has shorted far more silver than they could ever hope to cover, my first question was "why would they do that?" Not only that, why do it with a commodity where you must report your positions through the COT and Bank Participation Report? After all,the whole world can see what you are doing. [my added comment: Ted Butler included!]

Now I know the answer. According to Max Keiser and now a couple of other independent sources, it seems the reasons why first Bear Stearns and now JPM are so desperate to manipulate the price of silver down is due to the fact that BS and JPM shorted billions (yes billions not millions) in ounces of silver through their derivatives.

Just like Joe Conason at AIG, silver shorting through derivatives have caused literally billions in losses not the millions that we know about publicly. That is why JPM has been so desperate to manipulate the price of silver downward so blatantly. If I am right about this, then JPM will be dead when silver hits $60 or so. Based upon the COT and BPR, if silver hits $60, JPM will lose around an additional $6 billion dollars, a large number but not nearly large enough to bring down mighty JPM.

But what is not known is that due to the way that its derivatives are written, JPM's losses are exponentional once silver breaks $36 or so. Rumors has it that JPM could be losing as much as $40 billion once silver is above $50. It has something to do with how the derivatives are written with payment tied to the price of silver.

Since JPM was a price manipulator with respectt to the price of silver, JPM assumed that any derivative payments tied to silver would be less than they would be tied to some other index like the CPI or TIPS implied inflation index. JPM's inability to hold down the price of silver relative to other measures of inflation will cause unbelievable losses due to a mismatch in their derivative structures.

In essence,JPM has bet (a huge amount)through derivatives that silver will never outperform inflation. And why not,since JPM assumed that it will always be able to manipulate the price of silver. We have now come to understand that JPM's loss exposure to silver is much greater than we have ever dared to hope.
WB: In an effort to clear up some recent confusion regarding my latest posting, I will try to explain what I have recently uncovered.

JPM's current short silver position is estimated to be approximately 150 million ounces down from the recent 180 million ounces in August. The losses from these positions are easy to figure out. For every $10 rise in the price of silver, JPM will lose $1.5 billion. But what I have recently discovered is that through its derivative positions, JPM will lose about 5 times that amount ounce the price of silver is above $36. And ounce silver is above $45 dollars, JPM's losses will increase to 8 times the amount of losses in their short positions. The reason is that as the price of silver increases, certain provisions get activated which multiplies the losses.

One reader asks the question why isnt the price of JPM going down to reflect the lossesd in silver. My answer is that the price of silver is not high enough to begin to trigger losses in their derivative positions. But once silver approaches this critical level say around $36, then you should begin to see the price of JPM stock begin to reflect these losses.

In fact, traders are saying that once the price of silver surpasses the stock price of JPM, then for every dollar the price of silver go up, JPM should lose around 70 cents or so. This means that if silver hits $60, JPM will be a single digit stock.

JPM market cap is around $170 billion. If silver losses are as great as $40 billion in cash , then JPM will be insolvent. Period.

And friday the EU will vote in Strassbourg for the new rescue fund for EU states in trouble.

Rumor has it: there will not be a agreement because of Germany because even in their universe, 400 billion is still a lot of money to throw in the bottomless pit called Greece/Portugal & Spain YET AGAIN!

It's not that of a important thing. JUST THE ENTIRE FUTURE OF THE EURO.

This would make Oliver Twist blush!

And after that you'll see gold spike as will silver.

My guess it's being pusshed down so the big boys can get in to stock up on calls for the weekend.

Shorted Cable just before the release . I was astonished that there were buyers prior to the announcement . Whatever about what Credit Suisse overnight index swaps were indicating ( 13 % probability of a rate hike I think it was ) there was absolutely no chance that the BOE were going to change anything .

Maybe a quarter in May and end the year with rates at 1or 1.25%?What does it matter?Inflation is ten times the base rate,what difference is a quarter point going to make to anything?King and the BofE are trying to collapse sterling,and they are doing an excellent job,it is down 20% against a currency as weak as the Euro in the last few years.Considering all the problems there are in Euroland what does that tell you about the state of the UK economy and the governments finances?

I still think tptb are deliberately crushing sterling to force the UK government to join the Euro in an emergency "rescue" type situation,only time will tell,but sterling has to be a sell against ANY currency in my opinion.

Looks like a nice spring bounce at 1410 - just BoughtTFD @-13. AND, SLV seems to have found support just below the psychologically-important 35 mark ($34.86 spot just after NY open - buying that seems a righteous call option about now)